Grover Beach marijuana tax one step closer to the ballot

Medical marijuana plants in Honolulu, Hawaii.
Medical marijuana plants in Honolulu, Hawaii. AP

Grover Beach residents will likely vote on a marijuana tax measure this November, though the city still has to get past one more hurdle before it can be placed on the general election ballot.

The Grover Beach City Council once again pushed forward plans to place the measure on the Nov. 8 ballot at its meeting Monday night after it voiced support earlier this month to take advantage of potential marijuana revenue.

The council indicated it would like to tax marijuana businesses based on gross sales, and it directed staff to return to the council’s next meeting on Aug. 1 with the official wording for the measure. The Aug. 1 meeting will be the city’s last before the Aug. 12 deadline to submit a measure to San Luis Obispo County for placement on the November ballot, meaning if the council does not pass the measure at that meeting, it will be difficult to pursue the tax before the next general election in 2018.

One of the biggest considerations at Monday night’s meeting was whether to include language that would tax both medical and recreational marijuana businesses in the event a recreational marijuana initiative succeeds on the state ballot. The council decided it would like to include that wording so it could quickly take advantage of those potential sales, rather than waiting until 2018.

$25,000How much it costs to place a local measure on the ballot

The council also tentatively decided to pursue a sales-based rate known as a gross receipts tax — rather than a flat tax — because council members felt it would be more fair to small businesses.

A gross receipts tax scales the tax to size and activity, meaning small businesses would pay less, while larger businesses would pay more. A flat tax rate would charge businesses a set annual rate no matter a business’ size or the amount of sales it makes.

The measure would propose a 5 percent tax for commercial medical marijuana businesses, and a 10 percent tax for recreational marijuana businesses.

The council also is set to consider a square-footage tax — the preferred method for cultivation — that would charge businesses growing medical marijuana based on how much space the plants take up. For example, the staff report proposed the first 5,000 square feet of plants would be charged $25 per square foot, plus $5 for each additional square foot beyond that. A square-footage tax would be based on state licenses.

The council has for months pondered whether to pursue the measure and profit from medical marijuana sales in the city.

While no cities in San Luis Obispo County tax medical marijuana sales, other municipalities in the state do. Santa Cruz, San Jose, Palm Springs, Oakland and Sacramento have passed medical marijuana tax measures, while Santa Barbara and King City voters are expected to consider measures in November.

Grover Beach now permits some limited at-home cultivation, as allowed by the Compassionate Use Act of 1996, though it prohibits commercial cultivation and dispensaries. The city is in the process of conducting public outreach to draft new ordinances that would allow dispensaries or cultivation in the city, though that process is expected to take up to six months.

Kaytlyn Leslie: 805-781-7928, @kaytyleslie